The jobs report was much better than expected and has emboldened buyers to continue buying, said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. The direction continues to be improvement.

The U.S. unemployment rate fell in July for the first time in 15 months as employers cut 247,000 jobs, fewer than the 320,000 expected.

Adding to the positive tone, American International Group Inc surged 21.4 percent to $27.34 after posting its first quarterly profit in seven quarters.

AIG's stronger-than-expected results reassured investors that the embattled insurer, rescued by U.S. taxpayers during the financial crisis, was showing signs of life. At Thursday's close, the stock was up nearly 70 percent since the beginning of the week.

Retailers rose for a second day, despite reporting on Thursday their 11th straight month of sales declines.

The housing sector also advanced, with the Dow Jones U.S. Home Construction Index up 5.5 percent.

The move came a day after Beazer Homes USA Inc reported a third-quarter loss that was narrower than expected, and after Goldman Sachs added D.R. Horton Inc to its conviction buy list.

The S&P 500 is now up about 50 percent from its 12-year closing low in early March, helped by a string of economic data that has suggested a recovery, along with a majority of S&P 500 companies beating analysts' earnings estimates.